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Oncor To Acquire InfraREIT; Sempra Energy To Acquire 50% Stake In Sharyland Utilities

October 18,2018

Sempra Energy and Oncor Electric Delivery Company LLC announced that they have entered into agreements whereby Oncor will acquire 100 percent of the equity interests of InfraREIT, Inc. (InfraREIT), including all the limited-partnership units in its subsidiary InfraREIT Partners, LP, for approximately $1.275 billion, or $21 per share (or partnership unit), excluding certain transaction costs, and, concurrently, Sempra Energy will acquire a 50-percent limited-partnership interest in a holding company that will own Sharyland Utilities, LP (Sharyland) for approximately $98 million.

In addition, the transaction by Oncor includes InfraREIT's outstanding debt, which, as of June 30, 2018, was approximately $945 million.

As previously reported, Sharyland Utilities in Texas owns transmission assets and no longer serves retail customers in Texas, after its retail service area was previously acquired by Oncor

"This transaction advances our growth strategy and will expand our Texas regulated utility platform," said Jeffrey W. Martin, CEO of Sempra Energy. "These assets are highly desirable and supported by strong economic growth, attractive demographic trends and increased demand for electric transmission in Texas. We expect these acquisitions to be accretive to earnings. We also look forward to working with Sharyland on further developing electric transmission and related infrastructure in Texas."

"The purchase of InfraREIT gives us access to high-quality transmission assets that are adjacent to our service territory and are a great fit for our portfolio," said Allen Nye, CEO of Oncor. "As growth continues across Texas and new generation projects continue to come online, this acquisition positions us to make future investments in transmission infrastructure that will better serve the ERCOT market and our customers."

Oncor plans to fund its acquisition of InfraREIT with capital contributions proportionate to their ownership interests from Sempra Energy and TTI. Sempra Energy expects to utilize the proceeds from pending asset sales to fund its capital contribution of approximately $1.025 billion to Oncor, excluding certain transaction costs, and also to purchase the 50-percent interest in Sharyland for approximately $98 million.

The purchase of InfraREIT requires approval by its shareholders and is subject to a go-shop provision whereby InfraREIT can solicit superior bids. InfraREIT will solicit competing acquisition proposals through November 17, 2018. If the Conflicts Committee and Board of Directors accept a superior proposal prior to December 27, 2018 that was received during the go-shop period, then InfraREIT would pay a termination fee to Oncor of approximately $19 million. If the Conflicts Committee and Board of Directors accept an unsolicited superior proposal received after the go-shop period, InfraREIT would be required to pay a termination fee to Oncor of approximately $45 million.

The transaction requires approvals by the Public Utility Commission of Texas (PUCT) and Federal Energy Regulatory Commission, the expiration or termination of the applicable waiting period under the Hart-Scott-Rodino Antitrust Improvements Act of 1976, and the satisfaction of other regulatory requirements, certain lender consents and other customary closing conditions.

If all such closing conditions are satisfied, Sempra Energy and Oncor expect to close the transaction in mid-2019.

As part of the transaction, a subsidiary of InfraREIT will exchange certain assets with Sharyland, with the end result being that, after Oncor's acquisition of InfraREIT, Oncor will own InfraREIT's electric transmission and distribution business in Central, North and West Texas, and Sharyland will own assets in South Texas.

More specifically, as a condition to Oncor's acquisition of InfraREIT, InfraREIT's subsidiary, Sharyland Distribution & Transmission Services, L.L.C. ("SDTS"), and Oncor also signed a definitive agreement with SDTS's tenant, Sharyland Utilities, L.P. ("Sharyland") to exchange, immediately prior to Oncor's acquisition, SDTS's South Texas assets for Sharyland's Golden Spread Electric Cooperative interconnection ("Golden Spread Project") located in the Texas Panhandle, along with certain development projects in the Texas Panhandle and South Plains regions, including the Lubbock Power & Light interconnection ("LP&L Project").

After such asset swap, Sharyland will continue as an independent privately-held transmission utility, owned 50 percent by entities controlled by Hunter L. Hunt and other members of the family of Ray L. Hunt and 50 percent by entities controlled by Sempra Energy, and will own the transmission assets that it developed in South Texas.

M&A   Texas   Oncor   Sharyland   InfraREIT  

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